From free samples to complimentary desserts, everybody loves freebies — but what about free trade? Beyond the big and bold headline in the news about this thorny issue of late, what’s the deal really anyway?
So here it is — the three ways free trade impacts our daily lives:
1. It’s the reason why our favourite things don’t cost an arm and leg
Did you know that without free-trade agreements, an iPhone would cost a whopping US$2,000 by estimates?
The reason is simple: Apple sources its raw materials and components from all over the world, such as China, Taiwan, South Korea and even Singapore. This, according to research firm IHS Markit, costs Apple around US$224.80 (S$305.30) per phone (though price differs based on model).
The absence of free trade means high tariffs, which naturally leads to bigger price tags — and you, the consumer, would have to foot the bill.
Without free trade, your good ol’ cup of coffee — an absolute necessity for the sleep-deprived among us — would also cost a bomb.
After all, that Starbucks latte you drank in the morning is likely sourced from beans across Asia, Africa or Latin America. Also, do you take milk with your coffee? Starbucks uses an estimated 350 million litres of milk every year, enough to fill 155 Olympic-sized swimming pools. This has to come from somewhere beyond Singapore, too.
2. It’s the reason why Singapore innovation goes beyond our borders
The lack of tariffs also means that innovative products and services produced locally are able to find footholds overseas in a shorter period of time and at lower costs.
Consider the modest yet ubiquitous USB thumb drive, which was invented by a Singapore firm called Trek 2000 International back in 2000. Without free trade, the firm would have had a much harder time becoming the supplier of ThumbDrive technology to hardware giants then like IBM and Acer.
More recent examples of Singapore companies with a global presence are the luxury tea brand TWG Tea, the hospitality brand Banyan Tree and even the footwear and accessories retailer Charles & Keith.
So the next time you use a thumb drive, sip on some TWG tea, visit a Banyan Tree resort or shop from Charles & Keith, know that Singaporeans — and free trade — made them possible.
3. It’s the reason why Singapore has a rail network
Free trade agreements also create opportunities for local and foreign firms to enter previously centralised markets. In Singapore’s case, these agreements allow foreign firms to enter our public transport sector, thus bringing in unique knowledge and expertise.
This is important because, not only are railway networks expensive to build, they take a lot of expertise and resources. Having foreign firms here then, helps local firms to cope with construction demands. And it’s a two-way street too! Free trade agreements also help local firms gain access to expertise overseas in myriad different sectors.
By 2030, Singapore wants to have 360 kilometres of railway, or eight times the length of the Pan-Island Expressway. Foreign firms would have a big part to play for every inch of that railroad and all the stations in between.
At the recent Temasek European Advisory Panel (TEAP) meeting in London, we posed questions about free trade to business leaders and market watchers — and this is what they had to say. TEAP brings together eminent business leaders and experts to share insights and perspectives on major political, economic, social and industry trends, with a focus on Europe.
